Venezuela: The Left vs. reality

by Fausta Rodriguez Wertz | March 19th, 2014

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Venezuela: The Left vs. reality

by Fausta Rodríguez Wertz

Left­ies firmly believe the deceased Hugo Chavez “improved the econ­omy dras­ti­cally and ame­lio­rated poverty dras­ti­cally” because GDP went up, and fewer peo­ple were liv­ing below the poverty line by the time he died last year.

The num­bers are there: GDP did go up, and yes, fewer peo­ple were listed as liv­ing below the poverty line. Whose numbers?

The num­bers came from the Venezue­lan government.

The Inter­na­tional Mon­e­tary Fund keeps a List of IMF Mem­ber Coun­tries with Delays in Com­ple­tion of Arti­cle IV Con­sul­ta­tions or Manda­tory Finan­cial Sta­bil­ity Assess­ments Over 18 Months. As of the writ­ing of this post, Venezuela hasn’t held an Arti­cle IV con­sul­ta­tion with the IMF in 99 months.

Let me trans­late that into plain Eng­lish: The Venezue­lan gov­ern­ment has not allowed its own num­bers to be ver­i­fied for almost a decade.

It also stopped report­ing a num­ber of stan­dard indi­ca­tors sev­eral years ago:

Heavy gov­ern­ment spend­ing has fueled ram­pant infla­tion, which aver­aged an annual 22% dur­ing Mr. Chávez’s tenure. Its ant­i­cap­i­tal­ist rhetoric and broad state inter­ven­tion into the econ­omy have led to a dearth of invest­ment. Gross fixed cap­i­tal for­ma­tion declined to 18% of gross domes­tic prod­uct in 2011, from 24% in 1999, accord­ing to the World Bank. Net inflows of for­eign direct invest­ment stood at 2.9% of GDP dur­ing that same year, his first in office, nearly dou­ble the 1.7% in 2011. Cap­i­tal flight from Venezuela inten­si­fied as Mr. Chávez pur­sued more inter­ven­tion­ist poli­cies, includ­ing cap­i­tal con­trols and a fixed offi­cial exchange rate that — if you can get it — offers dol­lars at a quar­ter of the exchange rate that the green­back fetches in the black mar­ket. Stock mar­ket cap­i­tal­iza­tion of com­pa­nies listed on the Cara­cas Stock Exchange has gone from a pal­try 7.6% of GDP in 1999 to a minus­cule 1.6%.

Rather than pur­sue poli­cies that might stim­u­late invest­ment, the government’s response to shrink­ing pro­duc­tive capac­ity and high infla­tion has been price caps. The result? Short­ages of food and other basic neces­si­ties, peri­odic elec­tric brown– and black­outs, and far fewer jobs: the labor force par­tic­i­pa­tion rate has dropped from 52% to 46% in the Chávez era.

Does that sound like a “dras­ti­cally improved” economy?

But let’s look at GDP some more, with the num­bers that are avail­able: Chavez made the Venezue­lan econ­omy increas­ingly depen­dent on oil exports. In 1999, oil accounted for 80% of all exports. Back then the Annual Aver­age Domes­tic Crude Oil Price (AAD­COP) was $16.56. By the time of his death last year, the num­ber had risen to 95% at an AAD­COP of $91.17. GDP had to go up, if only because all the eggs in that one bas­ket got pricier; even then Chavez didn’t do all that well:

There was strong eco­nomic growth from 2004 to 2008 but GDP fell in 1999, 2002, 2003, 2009 and 2010. From the time Chávez took office in 1999 to 2011 Venezuela’s econ­omy grew by an aver­age of 2.8% per year. Dur­ing this same period Latin Amer­ica as a whole grew by 3.3% per year and Brazil grew by 3.4% per year.

While Venezuela’s oil pro­duc­tion decreases, Cuba still receives 100,000 bar­rels of its oil per day.

How about reduc­ing poverty?

Accord­ing to the UN’s Eco­nomic Com­mis­sion for Latin Amer­ica, the per­cent­age of the pop­u­la­tion liv­ing under the poverty line in Venezuela fell from 49.4% in 1999 to 27.8% in 2010. That is a pretty good record but there were sim­i­lar trends across Latin Amer­ica. In the region as a whole poverty dropped from 43.8% in 1999 to 31.8% in 2010. A few coun­tries, like Peru, Brazil and Panama, faired even bet­ter than Venezuela. Poverty rates in Peru dropped sharply from 54.7% in 2000 to 31.3% in 2010 — all three have solidly cap­i­tal­is­tic economies.

There are no ver­i­fi­able data avail­able on income dis­tri­b­u­tion, but again, accord­ing to gov­ern­ment num­bers

The coun­try now boasts the fairest income dis­tri­b­u­tion in Latin Amer­ica, as mea­sured by the Gini coef­fi­cient index.

In 2011, Venezuela’s Gini coef­fi­cient fell to 0.39. By way of com­par­i­son, Brazil’s was 0.52, in itself a his­toric low.

So every Venezue­lan now has a more equal slice of the cake. The trou­ble is, that cake has not been get­ting much bigger.

Venezuela is the fifth largest econ­omy in Latin Amer­ica, but dur­ing the last decade, it’s been the worst per­former in GDP per capita growth,” says Arturo Franco of the Cen­ter for Inter­na­tional Devel­op­ment at Har­vard University.

The Gini num­bers do not include mon­eys kept by cor­rupt offi­cials or “Tier II King­pins” drug lord Cab­i­net mem­bers.

Venezuela ranks 181 out of 189 in the World Bank Econ­omy Rank­ings.

Chavez’s true legacy is a ruined coun­try with mur­der rates dou­bling or tripling over a decade, Com­mu­nist con­trol of all insti­tu­tions and media, falling oil pro­duc­tion, crum­bling infra­struc­ture, a mori­bund pri­vate sec­tor (what lit­tle is left of it after the expro­pri­a­tions and nation­al­iza­tions), soar­ing infla­tion, flee­ing cap­i­tal, power out­ages and food short­ages, and now, elec­tronic food rationing cards.

Dras­ti­cally, yes. Improved, no.

Fausta Rodríguez Wertz writes on Latin Amer­i­can and US pol­i­tics and cul­ture at Fausta’s Blog.

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[olimome­ter id=3]

It’s Wednes­day and yes­ter­day a pair of tip jar hits moved us to $101 toward our goal of $365 to pay the mort­gage and the writers.

After two dis­mal weeks it’s vital to get those 11 $25 tip jar hits nec­es­sary to make the weekly goal to even have an out­side chance of mak­ing the mort­gage this month

We’ve done a lot in the last 10 days from CPAC to NLRC. but it can’t be done with­out you.

With 61 more $20 a month sub­scribers this site will be able to cover its bills for a full year.

I would ask that you do sub­scribe by hit­ting the but­ton below. If your finances allow it, con­sider choos­ing Hat level or bet­ter. A sub­scrip­tion comes not only with exclu­sive com­men­tary, but on a weekly basis you will have the oppor­tu­nity to get direct access to me by phone to pro­vide feed­back or sug­ges­tions to make sure this site is wor­thy of your finan­cial sup­port and patronage.


by Fausta Rodríguez Wertz

Lefties firmly believe the deceased Hugo Chavez “improved the economy drastically and ameliorated poverty drastically” because GDP went up, and fewer people were living below the poverty line by the time he died last year.

The numbers are there: GDP did go up, and yes, fewer people were listed as living below the poverty line. Whose numbers?

The numbers came from the Venezuelan government.

The International Monetary Fund keeps a List of IMF Member Countries with Delays in Completion of Article IV Consultations or Mandatory Financial Stability Assessments Over 18 Months. As of the writing of this post, Venezuela hasn’t held an Article IV consultation with the IMF in 99 months.

Let me translate that into plain English: The Venezuelan government has not allowed its own numbers to be verified for almost a decade.

It also stopped reporting a number of standard indicators several years ago:

Heavy government spending has fueled rampant inflation, which averaged an annual 22% during Mr. Chávez’s tenure. Its anticapitalist rhetoric and broad state intervention into the economy have led to a dearth of investment. Gross fixed capital formation declined to 18% of gross domestic product in 2011, from 24% in 1999, according to the World Bank. Net inflows of foreign direct investment stood at 2.9% of GDP during that same year, his first in office, nearly double the 1.7% in 2011. Capital flight from Venezuela intensified as Mr. Chávez pursued more interventionist policies, including capital controls and a fixed official exchange rate that — if you can get it — offers dollars at a quarter of the exchange rate that the greenback fetches in the black market. Stock market capitalization of companies listed on the Caracas Stock Exchange has gone from a paltry 7.6% of GDP in 1999 to a minuscule 1.6%.

Rather than pursue policies that might stimulate investment, the government’s response to shrinking productive capacity and high inflation has been price caps. The result? Shortages of food and other basic necessities, periodic electric brown- and blackouts, and far fewer jobs: the labor force participation rate has dropped from 52% to 46% in the Chávez era.

Does that sound like a “drastically improved” economy?

But let’s look at GDP some more, with the numbers that are available: Chavez made the Venezuelan economy increasingly dependent on oil exports. In 1999, oil accounted for 80% of all exports. Back then the Annual Average Domestic Crude Oil Price (AADCOP) was $16.56. By the time of his death last year, the number had risen to 95% at an AADCOP of $91.17. GDP had to go up, if only because all the eggs in that one basket got pricier; even then Chavez didn’t do all that well:

There was strong economic growth from 2004 to 2008 but GDP fell in 1999, 2002, 2003, 2009 and 2010. From the time Chávez took office in 1999 to 2011 Venezuela’s economy grew by an average of 2.8% per year. During this same period Latin America as a whole grew by 3.3% per year and Brazil grew by 3.4% per year.

While Venezuela’s oil production decreases, Cuba still receives 100,000 barrels of its oil per day.

How about reducing poverty?

According to the UN’s Economic Commission for Latin America, the percentage of the population living under the poverty line in Venezuela fell from 49.4% in 1999 to 27.8% in 2010. That is a pretty good record but there were similar trends across Latin America. In the region as a whole poverty dropped from 43.8% in 1999 to 31.8% in 2010. A few countries, like Peru, Brazil and Panama, faired even better than Venezuela. Poverty rates in Peru dropped sharply from 54.7% in 2000 to 31.3% in 2010—all three have solidly capitalistic economies.

There are no verifiable data available on income distribution, but again, according to government numbers

The country now boasts the fairest income distribution in Latin America, as measured by the Gini coefficient index.

In 2011, Venezuela’s Gini coefficient fell to 0.39. By way of comparison, Brazil’s was 0.52, in itself a historic low.

So every Venezuelan now has a more equal slice of the cake. The trouble is, that cake has not been getting much bigger.

“Venezuela is the fifth largest economy in Latin America, but during the last decade, it’s been the worst performer in GDP per capita growth,” says Arturo Franco of the Center for International Development at Harvard University.

The Gini numbers do not include moneys kept by corrupt officials or “Tier II Kingpins” drug lord Cabinet members.

Venezuela ranks 181 out of 189 in the World Bank Economy Rankings.

Chavez’s true legacy is a ruined country with murder rates doubling or tripling over a decade, Communist control of all institutions and media, falling oil production, crumbling infrastructure, a moribund private sector (what little is left of it after the expropriations and nationalizations), soaring inflation, fleeing capital, power outages and food shortages, and now, electronic food rationing cards.

Drastically, yes. Improved, no.

Fausta Rodríguez Wertz writes on Latin American and US politics and culture at Fausta’s Blog.

************************************************

Olimometer 2.52

It’s Wednesday and yesterday a pair of tip jar hits moved us to $101 toward our goal of $365 to pay the mortgage and the writers.

After two dismal weeks it’s vital to get those 11 $25 tip jar hits necessary to make the weekly goal to even have an outside chance of making the mortgage this month

We’ve done a lot in the last 10 days from CPAC to NLRC. but it can’t be done without you.

 

With 61 more $20 a month subscribers this site will be able to cover its bills for a full year.

I would ask that you do subscribe by hitting the button below.  If your finances allow it, consider choosing Hat level or better.  A subscription comes not only with exclusive commentary, but on a weekly basis you will have the opportunity to get direct access to me by phone to provide feedback or suggestions to make sure this site is worthy of your financial support and patronage.


 

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